Slide 1: Third Quarter 2012 Financial Results
Third Quarter 2012 Financial Results November 7, 2012 Accelerating Value Realization, Growing Through Strategic Investments and Delivering the Greatest Value from Every Acre
Slide 2: Notice to Investors
Notice to Investors This presentation contains “forward-looking statements” within the meaning of the federal securities laws. Forward-looking statements are typically identified by words or phrases such as “will,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,”
Slide 3: Third Quarter 2012 Financial Results
Third Quarter 2012 Financial Results 3 3 Accelerating Value Realization, Growing Through Strategic Investments and Delivering the Greatest Value from Every Acre
Slide 4: Net Income (Loss) Before Special Items Reflect Benefit of Accelerating Real Estate Value Realization
Net Income (Loss) Before Special Items Reflect Benefit of Accelerating Real Estate Value Realization 4 ($ in Millions, except per share data) 3rd Quarter 2012 3rd Quarter 2011 Net Income (Loss) ($0.7) $36.4 Earnings (Loss) Per Share After-Tax ($0.02) $1.02 Special items per share: Credo acquisition
Slide 5: Accelerating Value Realization Drives Improved Segment Operating Results
Accelerating Value Realization Drives Improved Segment Operating Results 5 ($ in Millions) 3rd Quarter 2012 3rd Quarter 2011 Segment Earnings (Loss): Mineral Resources $6.1 $3.6 Real Estate 12.7 (4.3) Fiber Resources 1.8 0.5 Total Segment Earnings (Loss) $20.6 ($0.2) Q3 2012 real estate segment resu
Slide 6: Generating Significant Free Cash Flow and Debt Reduction
Generating Significant Free Cash Flow and Debt Reduction By Accelerating Real Estate Value Realization 6 YTD Q3 2012 Significant Transactions: ($ in millions) Timing Cash Debt Palisades West Venture – sale of 25% interest Q1 2012 $32 $ -- Light Farms Venture– sale of 800 acres Q2 2012 25 (31) Multif
Slide 7: Maintaining Balance Sheet Strength and Financial Flexibility Following Acquisition of Credo Petroleum
Maintaining Balance Sheet Strength and Financial Flexibility Following Acquisition of Credo Petroleum PRELIMINARY – SUBJECT TO ADJUSTMENT Q3 2012 Balance Sheet Adjustments Q3 2012 FOR Consolidated ($ in millions) Assets Cash $66 ($56) $10 Real Estate 552 - 552 Oil & Gas Properties 7 140 147 Timber 1
Slide 8: Third Quarter 2012 Operating Highlights
Third Quarter 2012 Operating Highlights 8 Accelerating Value Realization By Increasing Oil Production and Residential Lot Sales and Growing Net Asset Value by Capitalizing on Strategic Growth and Investment Opportunities
Slide 9: Building Momentum - Third Quarter Highlights
Building Momentum - Third Quarter Highlights Closed acquisition of CREDO Petroleum for $146 million Sold Broadstone Memorial multifamily community for $56.4 million Acquired multifamily site in Nashville, TN for $11.4 million Sold 269 residential lots – average pricing up 17% vs. Q3 2011 1,294 lots
Slide 10: Third Quarter 2012 Mineral Resources
Third Quarter 2012 Mineral Resources 10 Building Momentum By Driving Leasing and Exploration to Increase Production and Reserves 10
Slide 11: Increased Leasing Activity and Production Growth Driving Improved Results
Increased Leasing Activity and Production Growth Driving Improved Results Segment Earnings Reconciliation Q3 2011 vs. Q3 2012 Q3 2012 Highlights Leased 3,100 net mineral acres for over $1,100 / acre Received approximately $593,000 in delay rentals Oil production up over 63% vs. Q3 2011 2 additional
Slide 12: Strategy Execution Driving Increased Oil Production
Forestar’s Share of Quarterly Oil Production Q1 2011 – Q3 2012* Note: Includes ventures; gross wells owned and operated by third party lessees / operators 12 Forestar’s Share of Annual Oil Production 2010 – 2012* Strategy Execution Driving Increased Oil Production * Excludes any benefit from Credo P
Slide 13: Acquisition Provides Meaningful Scale and Solid Platform For Future Growth
Acquisition Provides Meaningful Scale and Solid Platform For Future Growth and Investment Combined Mineral Interests* Market Owned Leased Total Texas 252,000 3,000 255,000 Georgia / Alabama 195,000 - 195,000 Louisiana 144,000 - 144,000 Nebraska / Kansas - 101,000 101,000 North Dakota - 6,000 6,000 O
Slide 14: CREDO's Share of Quarterly Oil Production
CREDO’s Share of Quarterly Oil Production Fiscal Q1 2011 – Q3 2012 CREDO PV-10* Fiscal 2008 –2011 ($ in millions) 14 Credo Oil Production Growth Accelerating Timely acquisition as production and reserve growth increasing 25% CAGR *PV-10 represents present value of estimated future oil and gas revenu
Slide 15: Bakken / Three Forks Drilling Activity Accelerating Production and Reserve Growth
Bakken / Three Forks Drilling Activity Accelerating Production and Reserve Growth Bakken / Three Forks Leasehold Interests Net Mineral Acres 6,200 Average working interest 8.0% Potential Units 50 Total Potential Gross Wells 400 Avg. Well EUR* Assumption >500 Mboe YTD Third Quarter 2012 Gross Wells C
Slide 16: Kansas and Nebraska Represent Scalable Exploration Model with Solid Returns
Kansas and Nebraska Represent Scalable Exploration Model with Solid Returns Kansas & Nebraska Leasehold Mineral Interests 16 16 101,000 net acres of leasehold interest Nebraska – 55,000 net acres Kansas – 46,000 net acres Target formation: Lansing - Kansas City Lower acreage acquisition costs Drilli
Slide 17: Well Positioned For Meaningful Production and Reserve Growth
Well Positioned For Meaningful Production and Reserve Growth Annual Oil Production 17 17 Forestar Oil & Gas Highlights 735,000 net mineral acres* > 924 gross wells** 382 working interest 542 royalty interest > 900,000 BOE of annual production*** Oil = 475,000 Bbls Natural Gas = 2.5 Bcfe 2013 Capex T
Slide 18: Third Quarter 2012 Fiber Resources Highlights
Third Quarter 2012 Fiber Resources Highlights 18 Building Momentum Through Sustainable Harvests and Maximizing Recreational Lease Activity 18
Slide 19: Increased Harvest Activity Driving Improved Results
Increased Harvest Activity Driving Improved Results Q3 2012 Highlights Sold over 197,000 tons of fiber, up almost 82% vs. Q3 2011 Average fiber pricing $11.56 per ton, up over 28% vs. Q3 2011 99% of land leased for recreation Fiber Sales Q3 2011 – Q3 2012 ($ in millions) 19 Segment Earnings Reconcil
Slide 20: Third Quarter 2012 Real Estate Highlights
Third Quarter 2012 Real Estate Highlights 20 Building Momentum By Increasing Residential Lot Sales and Capitalizing on Growth Opportunities
Slide 21: Accelerating Value Realization of Stabilized Income Producing Properties
Accelerating Value Realization of Stabilized Income Producing Properties Driving Improved Results Q3 2012 Highlights Sold Broadstone Memorial multifamily project for $56 million $10.2 million gain $30.0 million in cash $26.5 million in debt reduction Sold 269 residential lots, average price up 17% v
Slide 22: Developing a Capital Efficient Multifamily Business
Timely Developing a Capital Efficient Multifamily Business 22 Stabilized Assets Ownership Units Occupancy Sales Price* Cap Rates Broadstone - Houston, TX 100% 401 98% $56 million 5.8% Las Brisas - Austin, TX 59% 414 95% $40 million 5.9% Under Construction Ownership Units Occupancy Target Completion
Slide 23: Increasing Multifamily Pipeline Through Acquisition of Development Site in Nashville
Increasing Multifamily Pipeline Through Acquisition of Attractive Development Site in Nashville 23 23 Nashville site acquired for $11.4 million Located two miles from central business district, employers and transportation One of fastest growing MSAs - 8% growth projected over next five years Produc
Slide 24: Real Estate Revenues Benefitting From Increased Residential Lot Sales Activity
Real Estate Revenues Benefitting From Increased Residential Lot Sales Activity 24 Note: Includes consolidated ventures Real Estate Sales Activity (Excluding Timberland Sales) 2009 - 2012 Real Estate Sales Highlights 2012 residential lot sales revenue expected to be up almost 100% vs. 2010 Oct 2012 o
Slide 25: Third Quarter 2012 Strategic Initiatives
Third Quarter 2012 Strategic Initiatives 25 Accelerating Value Realization, Optimizing Transparency and Raising NAV Through Disciplined Investments 25 25
Slide 26: Our Focus: Triple In FOR Initiatives
Our Focus: Triple In FOR Initiatives 2012 Activity Focus on Accelerating Value Realization Triple Residential Lot Sales Lot sales up over 21% vs. 2011 Oil production up over 95% vs. 2011 Total segment earnings up over 277% vs. 2011 Sold two stabilized multifamily projects, generating approximately $
Slide 27: Investor Conference December 11, 2012
December 11, 2012 8:30 am – 12:00 pm Location: New York City Hyatt Grand Central Park Ave at Grand Central Terminal New York, New York 27 Investor Conference
Slide 28: Building Momentum By Accelerating Value Realization
Accelerating Value Realization Increasing oil production and proven reserves Growing lot sales and increasing market share Realizing value from stabilized commercial assets Capitalizing on growth opportunities and investments to generate near-term cash flow and earnings Building Momentum By Accelera
Slide 29: Anna Torma, SVP Corporate Affairs
Anna Torma SVP Corporate Affairs Forestar Group Inc. 6300 Bee Cave Road Building Two, Suite 500 Austin, TX 78746 512-433-5312 annatorma@forestargroup.com 29 29
Slide 30: Appendix - Segment KPI's - Reconciliation of Non-GAAP Financial Measures
Third Quarter 2012 Appendix - Segment KPI’s - Reconciliation of Non-GAAP Financial Measures 30 30 30
Slide 31: Mineral Resources Segment KPI's
31 MINERAL RESOURCES SEGMENT KPI'S Q3 2012 Q3 2011 YTD Q3 2012 YTD Q3 2011 Leasing Activity Net Acres Leased 3,120 380 3,900 7,700 Avg. Bonus / Acre $1,130 $265 $975 $288 Royalties* Oil Produced (Barrels) 69,000 42,300 199,800 102,200 Average Price / Barrel $75.81 $97.83 $89.15 $94.23 Natural Gas Pr
Slide 32: Real Estate Segment KPI's
REAL ESTATE SEGMENT KPI'S Q3 2012 Q3 2011 YTD Q3 2012 YTD Q3 2011 Residential Lot Sales Lots Sold 269 311 981 808 Average Price / Lot $54,100 $46,200 $49,700 $48,900 Gross Profit / Lot $20,100 $16,400 $18,000 $18,400 Commercial Tract Sales Acres Sold 18 -- 55 24 Average Price / Acre $133,900 -- $75,
Slide 33: Fiber Resources Segment KPI's
33 FIBER RESOURCES SEGMENT KPI'S Q3 2012 Q3 2011 YTD Q3 2012 YTD Q3 2011 Fiber Sales Pulpwood Tons Sold 160,000 85,800 265,200 222,100 Average Pulpwood Price / Ton $9.54 $7.57 $9.51 $8.57 Sawtimber Tons Sold 37,400 22,900 66,700 51,200 Average Sawtimber Price / Ton $20.21 $14.33 $19.88 $15.47 Total
Slide 34: Reconciliation of Non-GAAP Financial Measures (Unaudited)
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) Forestar’s Net Income and Earnings Per Share (EPS) excluding special items for the quarter and first nine months ended September 30, 2012 and 2011 are non-GAAP financial measures within the meaning of Regulation G of the Securities and Exchan
Slide 35: Anna Torma, SVP Corporate Affairs
Anna Torma SVP Corporate Affairs Forestar Group Inc. 6300 Bee Cave Road Building Two, Suite 500 Austin, TX 78746 512-433-5312 annatorma@forestargroup.com 35